Bruce gives an intro about why he got excited about open source. As
I mentioned, Bruce has criticized Novell in the past (and will
today). The conference is being held at Novell, but the security
folks haven't thrown him out yet.

How can "innovation" go public? It's not a company. FOSS
development share a lot in common with investment markets. Note:
this isn't about open source companies going public. It' about a new
way of innovating in a public setting.

Open source isn't Redhat, Novell, or HP. They're part of the
community, but not the majority. Open source is development teams
that make products. Apache, wikipedia, and others are products, not
companies.

Open source appears to go against capitalistic economic theory, but
only until you look closely. It's main developers are not it's
vendors. It's very customer -centric in its emphasis, rather then
vendor-centric. (Cue Doc Searls here.)

Companies go on the stock market to distribute cost and risk with the
motivation of sharing in the reward. Non-open source software
developers must pay for development first and then start making a
profit. The stock will be worth nothing if the company fails.
Stocks allow many people to share in the cost and risk with the hope
of a reward.

FOSS distributes the cost and risk of development among many
developers because each share sin the development and no one puts in
too much. The pay-back is working software that is high quality and
well suited to it's user's needs--because some of them wrote it.
FOSS developers float their source code on the market for others to
share.

Amazon, Gogle, Merrill Lynch, and Pixar are all companies that give
away software and still make profits. They do so without giving away
their critical innovations.

Most companies don't sell software--they sell books, wine, services,
and so on. But all of these companies still need software. Software
isn't a top-line product for most companies, it's a cost of doing
business. Most of the software that companies need is
non-differentiating. They can give this away and it doesn't make any
difference in how customers perceive the company. Giving your
competitor software makes them your partner--in that
non-differentiating area. Bruce guesses that about 95% of the
software in any company is non-differentiating.

Companies should naturally try to remove as much of their budget from
non-differentiating software and move it to the innovative software in
their business that differentiates them. Of course, that means that
you have to find a way to get the other 95% of your software as
cheaply as possible: enter FOSS.

Bruce points to HP and IBM. HP had plans at on time to spend $1
billion rewriting HPUX. Maybe they still are. IBM, on the other
hand, decided that AIX wasn't a long term differentiator.

How do you find differentiating software? If yur competitors can get
it, it's not differentiating. So, neither Microsoft not FOSS is
differentiating. For software to being differentiating, you have to
control it. So, your employees or consultants (as long as you
control it) have to create it for it to be differentiating.

Business differentiating innovation has high value to a company.
Non-differentiating innovation improves some internal aspect of the
business, but doesn't make a difference to the customer.

Sharing non-differentiating innovation between companies has a low
transaction cost. Open source has always trumped consortia (think
X.org vs. X Consortium, Linux vs. Taligent, and GNOME vs. CDE). Open
source structures put product first. Consortia put vendors first and
they work to the detriment of the product.

People with similar (crazy) ideas can form on the 'Net and create
real product with no capitalization except the sweat of their brow.

Open source is a massively parallel drunkard's walk
filtered by a Darwinistic process. The result is that 10,000 people
all do what they feel like and the result is Linux or Apache. Open
source isn't like a company, it's like an ecosystem. Projects start
with one person's idea, but they don't become open source until
they're at least a little useful to someone else. Lots of projects
die before they reach critical mass. They don't waste much
resource.

Strategic marketing, on the other hand depends on someone predicting
the future. Being smart isn't good enough--you have to be prescient.

When an open source project dies, someone else can take over--anyone
has the right. This strongly protects companies that use FOSS from
having the software become useless. Source code escrow doesn't
work: judges frequently nullify them.

Should FOSS be allowed to displace proprietary software? Should
refrigerators have been allowed to displace the large ice industry at
the turn of the century? FOSS should be allowed to displace
proprietary software when there are clear advantages. Of course,
that's a political statement.

If you can take FOSS into a business, take the low-hanging fruit
rather than attacking Microsoft on the desktop. FOSS is being used
in almost every business and become a mission critical
function--often without the business executives being aware of it.